Punjab imposes New Tax on Property Leasing

The Punjab government has reduced rate of General Sales Tax (GST) on construction services to 5 percent from 16 percent fixed in 2016-17, also removing registration fee for new firms in the provincial finance bill 2017-18.
The government, in the new finance bill, has announced imposing 3.25 percent new tax on leasing rural property and 5.25 percent on urban properties. Sale of public property will attract 5 percent in urban and 3 percent tax in rural areas. The finance bill has also proposed imposition of 5 percent tax on internet services, whether dialup or broadband, including email services, data communication network services and value added data services, valued at more than Rs1500 per month.
However, the students are excluded from this tax. It is to be noted that tax on internet had been imposed two years ago but later it was withdrawn which has now been imposed again. Also, under the tax reforms introduced in the finance bill, the tax authorities have been barred from further action in case of appeal. It is to be noted that in a sudden move before budget 2015-16, the Punjab government had imposed 19.5pc internet tax on broadband services. The tax was applied on broadband services, both residential as well as mobile, where total bill was above Rs1,500 and where internet speed if above 2 Mbps. This was similar to the tax already applied in Sindh by provincial government for fiscal year 2014-2015. The tax was applicable from May 29th, 2015 and the students and educational institutions were exempted.
This was a major development because province of Punjab had more than half of Pakistan’s population and internet penetration was gaining strength with the introduction of 3G/4G services. The imposition of this tax could enable the government to earn millions in the month of June but severely hurt broadband industry.
Most broadband companies were in the process of upgrading subscribers to higher speeds and many people were choosing better packages on their own. However, in November 2015, the Punjab government issued the notification withdrawing 19.5% tax on mobile internet on pressure of media.
Now, with a view to imposing new tax the Punjab Revenue Authority officials counted major three reasons for re-imposition of GST on internet in the province. Punjab government believed that after it had withdrawn internet tax in the province mobile phone companies were expected to bring down rates for 3G/4G. However, this clearly did not happen and hence, the internet tax withdrawal didn’t mean much for the customer. The government sources claimed that mobile phone companies unlike they had committed didn’t invest much in Punjab and that the withdrawal of internet taxes didn’t translate into better internet penetration in the province.
The gift deeds will attract 5 percent tax of the value of the property provided that if the gift deed is executed between spouses, father, mother, son, daughter, grandparent, siblings or from one wife or widow to another wife or widow of the same husband, and the rate of stamp duty shall be three percent of the value of the property. According to finance bill, the gift deeds in rural areas will attract 3 percent tax.
The Punjab Board of Revenue has introduced e-stamping project for facilitation and to eliminate the usage of counterfeit stamp papers. Owing to great success, it has been proposed to merge all the taxes/duties/fees in one head of account of stamp duty which would be issued through e-stamping system. The merger of all taxes would ease the procedure of deposits and helpful in reconciliation process as well.

The government has also announced reduction of GST on construction services from 16 percent to 5 percent, ending all kinds of registration fee for new firms. During the budget speech, Finance Minister Ayesha Pasha stated that the government will launch investment bond of Rs25 billion in the open market for revenue collection.

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